In a typical commercial transaction between a buyer and a seller, the buyer may contract to buy goods from a seller. The contract may require that the seller ship the goods to the buyer on a predetermined shipment date and it may also require the buyer to pay a contract amount for the goods on a predetermined contract payment due date.
In some cases, the seller may be willing to accept less than the contract amount, in exchange for an earlier payment. For example, a buyer may form a contract with a seller to purchase 1000 computer monitors from the seller for $300,000. The contracted payment due date may be December 1. The seller, however, may be willing to accept a 10% discount, or $270,000, for the computer monitors if the seller can receive the discounted payment by June 1.
If buyer is not willing to pay for the goods any earlier than the contract due date, a financing entity such as the buyer's bank may be willing to advance a discounted payment amount to the seller in advance of the contracted due date in exchange for the right to receive the full contract amount on the contract payment due date. For example, in the above example, the buyer's bank may be willing to send the discounted amount of $270,000 to the seller on June 1, in exchange for the right to receive the $300,000 contracted amount on December 1. Assuming that the buyer pays the $300,000 on the contracted payment date, the buyer bank would receive the difference between the contracted amount and the discounted amount (here $30,000) as compensation for financing the commercial transaction.
The buyer bank's decision as to whether or not to advance the seller the discounted amount in advance of the contracted payment due date depends on the creditworthiness of the buyer. For example, if the buyer is not very creditworthy, then the buyer bank may conclude that it is not likely that the buyer will pay the contracted amount on time and/or in full, and that it is consequently too risky to send the advance discounted payment to the seller. On the other hand, if the buyer bank determines that the buyer is a good credit risk, then the buyer bank may determine that the risk of not getting paid is low and the buyer bank may consequently send the advance payment to seller.
Conventional credit scores could be used by the buyer bank to determine whether or not to advance funds to the seller. Conventional credit scores, however, are generic and may not give the buyer bank sufficient information about the risk of not getting paid by the buyer. For example, generic credit scores are formulated by reviewing the payment histories for all payments made by buyers for direct and indirect expenses (e.g., utilities, debts, and other payments). If a buyer has a history of delaying the payment on some types of invoices, but not others, the generic conventional credit score may not adequately inform the buyer bank of the buyer bank's risk.
Illustratively, a buyer may pay utility invoices (e.g., for electricity) on time 100% of the time, raw material invoices on time 95% of the time, and office equipment invoices on time 40% of the time. The buyer's generic credit score may be high, since most of the buyer's invoices are paid on time. If the buyer bank is considering advancing payment to a seller based on a contract by a buyer to buy office equipment from the seller, the buyer's generic credit score may indicate that the buyer is a good credit risk, even though the buyer is a bad credit risk when office equipment purchase contracts are involved.
In addition, as a practical matter, credit information is difficult to obtain and/or may not be current or timely. This is particularly true if the buyers and sellers are in different jurisdictions and/or foreign countries, or if they are new and have not developed suitable transaction histories. In such cases, the sellers or financing entities may not have access to any reliable credit reports, let alone credit reports that are accurate and allow them to make informed decisions relating to specific commercial transactions.
In addition to this problem, there are other problems with conventional financing systems. Sometimes, the sellers of goods and services would like to receive financing offers, but there is no convenient forum that allows sellers to conveniently find willing financing entities who might be willing to finance their commercial transactions. Conversely, financing entities such as banks may want to offer financing to buyers and sellers, but may not know how to contact willing buyers and sellers.
Embodiments of the invention address these and other problems.